But the most important of them was the South Korean Export Growth Indicator (what I call SKEG) and its accurate history of forecasting global earnings. . .

This indicator in early May turned negative – signaling an upcoming global earnings recession. Yet at the time, the mainstream completely ignored this – if they even followed this indicator in the first place.

Since then, the market hasn’t priced in any potential risk to earnings – they’ve actually become more bullish on their earnings estimates.

This is important because a stronger U.S. Dollar and rising interest rates wreak havoc on emerging markets and foreign debtors that borrowed in dollars.

Second, a stronger dollar means foreign debtors need to convert their local currency into dollars to pay back any interest and debt owed. So, for example, if the dollar has risen 5% against their currency, they must pay 5% more.

And when you get into the billions borrowed, that extra 5% is a massive amount.

Now, looking back at the SKEG Indicator above. . .

Let’s see how earnings performed the last time South Korean Exports dropped this sharply – between the 2014 and Q4-2016 period.

Even though the last time SKEG dropped this low and global earnings soon collapsed with it – the market today doesn’t seem to care.

In fact, the crowd’s estimate for the future is very optimistic – clearly there isn’t any worry of a slowdown in global earnings.

But the SKEG Indicator is a leading-indicator – which means that it comes first. And since South Korean Export Growth has tanked, global earnings will follow.

Putting it simply – if history shows us anything, then there is a global earnings recession right up ahead.

The stronger dollar and rising rates are putting pressure on foreign economies and global corporate earnings. All it takes is one ‘less-than-stellar’ earnings report to come out and shake up Wall Street.

This will cause a sharp re-pricing of all risky assets – especially emerging markets.

I expect the mainstream to start noticing this problem sooner than later. Don’t be behind the herd on this one.

The SKEG Indicator is an important and useful leading-indicator for a reason. its accuracy of forecasting global earnings is hard to deny.